Lark Corp. has a contract to construct a P5,000,000 cruise ship at an estimated cost of P4,000,000. The company will begin construction of the cruise ship in early January 20x4 and expects to complete the project sometime in late 20x7. Lark Corp. has never constructed a cruise ship before, and the customer has never operated a cruise ship. Due to this and other circumstances, Lark Corp. believes there are inherent hazards in the contract beyond the normal, recurring business risks. Lark Corp. expects to recover all its costs under the contract. During 20x4 and 20x5, the company has the following activity: 20x4 20x5 Costs to date P 980,000 P2,040,000 Estimated costs to complete 3,020,000 1,960,000 Progress billings during the year 1,000,000 1,000,000 Cash collected during the year 648,000 1,280,000 For the year ended December 31, 20x5, how much revenue should Lark Corp. recognize on its income statement? P980,000 P2,040,000 P1,300,000 P1,060,000
Lark Corp. has a contract to construct a P5,000,000 cruise ship at an estimated cost of P4,000,000. The company will begin construction of the cruise ship in early January 20x4 and expects to complete the project sometime in late 20x7. Lark Corp. has never constructed a cruise ship before, and the customer has never operated a cruise ship. Due to this and other circumstances, Lark Corp. believes there are inherent hazards in the contract beyond the normal, recurring business risks. Lark Corp. expects to recover all its costs under the contract. During 20x4 and 20x5, the company has the following activity:
20x4 20x5
Costs to date P 980,000 P2,040,000
Estimated costs to complete 3,020,000 1,960,000
Progress billings during the year 1,000,000 1,000,000
Cash collected during the year 648,000 1,280,000
For the year ended December 31, 20x5, how much revenue should Lark Corp. recognize on its
income statement?
P980,000
P2,040,000
P1,300,000
P1,060,000
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